DevTools Brew #19:From Open-Source to Enterprise: How Vercel Built a Product-Led Motion on Top of NextJS, 10 Things We’ve Learned About Pricing (PostHog)...

Dear friends, welcome to DevTools Brew #19!

If you're new here, my name is Morgan Perry, co-founder of Qovery Every Saturday, I share a roundup of the stories, strategies, and insights behind successful devtool companies.

In this Issue #19:

• 📈 From Open-Source to Enterprise: How Vercel Built a Product-Led Motion on Top of NextJS

• 💻 10 Things We’ve Learned About Pricing (PostHog)

• ⭐ Star History Weekly Pick

• 🎬 Open-Source Business Strategy with Tyler Jewell

I hope you will enjoy this new edition.
Let's dive in!

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📈 From Open-Source to Enterprise: How Vercel Built a Product-Led Motion on Top of NextJS

Today, let’s explore the journey of Vercel, the company behind NextJS, as they transitioned from open-source success to building a product-led motion on top of NextJS.
Kevin Van Gundy (CRO at Vercel) shared their playbooks for engaging open-source users, designing their go-to-market strategy, and scaling monetization while staying true to their developer-first roots.
Let’s delve into the key highlights of Vercel's approach to segmentation, starter kits, sales organization, and more.

Key Highlights:

Segmentation: How Vercel engages the right users uf NextJS

• Identifying target verticals: Vercel focused on verticals where the value of NextJS and their commercial offering was most evident, such as media/publishing and e-commerce.

• Offering content and resources: Vercel provides actionable content like starter kits, allowing developers to clone and deploy code to experience the solutions firsthand.

• Automation for nurturing: Vercel leverages automation to identify the right customers at the right stage and deliver personalized outreach, promotions, and resources.

From Free Self-Serve to Enterprise: How Vercel defined its commercial product lineup

• Free Tier: Vercel's free-tier offering, called "Hobby," aims to provide as much value as possible to individual developers, allowing them to keep their personal accounts forever.

• Pro Tier: The Pro Tier focuses on enabling small teams or single departments to quickly go from idea to deployment without needing extensive interaction with the Vercel team.

• Enterprise Tier: Vercel's Enterprise Tier caters to large websites and engineering organizations, empowering them to develop end-to-end with Vercel and NextJS.

How Vercel organized their Sales teams

• Sales team: Vercel built a sales team of technical Account Executives and Sales Engineers who work alongside developers, explaining the benefits and process of using Vercel.

• Solutions Engineering Team: This team focuses on building tools like git repos and starter kits to showcase the product's capabilities without requiring direct sales intervention.

• Customer Success Team: Vercel's Customer Success Team is known for their deep knowledge and helpfulness, actively assisting customers and solving their problems.

KPIs that an "Open-Source to Enterprise" company should track

• Open Source Usage: Monitoring ongoing usage of the open-source project and tracking new joiners to the open-source community.

• Team Adoption: Tracking milestones in the formation of a team using Vercel, such as transitioning from individual developers to pairs or larger dev teams, to identify upsell opportunities.

Two common mistakes when setting up and scaling PLG

• Data quality: Not investing early in data quality and revenue operations, which hampers customer understanding and the ability to tailor nurture campaigns effectively.

• Sales hires mismatch: Failing to align sales hires with the company's maturity, leading to misalignment in sales metrics and missing potential revenue opportunities.

Learning as a Sales leader in a developer-focused company

• Technical skills development: Sales leaders in developer-focused companies should gain technical skills to understand the product ecosystem and engage with developers authentically.

• Asking questions and seeking assistance: Actively seeking knowledge, self-serving, and collaborating with engineers to understand the platform deeply and better support customers.

The journey of Vercel, from open-source success to building a product-led motion on top of NextJS, offers valuable insights for devtool companies looking to scale and monetize their offerings while staying true to their developer-first roots.

—> To explore the full conversation between Kevin (CRO Vercel) and François (Decibel.vc), check it out here.

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💻 10 Things We’ve Learned About Pricing (PostHog)

In the world of SaaS and devtools startups, pricing plays a crucial role in determining product-market fit and driving revenue. Understanding the key principles and strategies behind pricing can significantly impact a company's success.
Thrilled to share PostHog's 10 key lessons about pricing.

10 Key Lessons

1. Talk to your customers about pricing

• Pricing is as important as any other feature for product/market fit.

• Engage in conversations with customers to avoid pricing pitfalls.

2. Treat your pricing like a product

• Assign an owner to pricing.

• Understand what customers value.

• Build and maintain pricing tooling.

• Experiment with different pricing strategies.

• Continuously iterate and refine pricing.

3. Define your pricing principles

• Establish guidelines for pricing decisions.

• Consider the potential of newly released features for pricing.

• Critically think about where new features fit into the pricing scheme.

4. Freemium + free trial can work together:

• Combine freemium models with time-limited reverse trials.

• Allow users to explore advanced features before conversion.

• Foster longer-term relationships with potential customers.

5. Price your product for teams, not individuals:

• Individual-focused products have poor unit economics.

• Aim to transition individual users to team-based usage.

• Team revenue holds greater value and improves economics.

6. Sticky features should be free (with a reasonable limit)

• Offer sticky features for free to improve retention.

• Set a reasonable limit to maintain profitability.

7. Pricing changes can be great PR

• Pricing changes can generate positive marketing and growth opportunities.

• Announce pricing changes to delight and retain customers.

8. Charging as much as you can is short-sighted:

• Pricing to value may lead to churn and negotiation difficulties.

• Focus on customer happiness, momentum, and long-term growth.

9. Don't assume $x.99 pricing is better:

• Round number pricing without the 1 cent deduction can be effective.

• Test different pricing strategies to find what works best for your product.

10. Charging for a feature can increase usage:

• Charging for a previously free feature can increase user engagement.

• Customers perceive charged features as more valuable and provide valuable feedback.

—> To gain deeper insights into these lessons, read the full content originally published in Product for Engineers.

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⭐ Star History Weekly Pick

The Star History Weekly Pick is:

• QuestDB: “An open-source time-series database for fast ingest and SQL queries.”

  • ⭐️ 12.3k stars reached

  • Github: https://github.com/questdb/questdb

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🎬 Open-Source Business Strategy with Tyler Jewell

Tyler Jewell is an enterprise technology investor and managing director of Dell Technologies Capital, with a hand in many open source companies.

Listen to Jewell discuss business strategy for open source companies and the common mistakes of running open source. Jewell also shares a little about the resiliency of open-source businesses in the economic market.

Highlights:

• Akka projects over the years (4:00)

• When companies should have open source licenses vs. when they should not (11:35)

• Eclipse Che open source (13:20)

• Is it better to be open source as a company? (14:30)

• Open source as a development strategy rather than a business strategy (19:10)

• Common mistakes in open source companies (21:25)

• Are open-source companies resilient economically? (23:14)

Full audio episode here

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It’s already over! If you have any comments or feedback, you can reach out to me on LinkedIn or Twitter. 

Thanks for reading,
Morgan

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